In April, 2018, Norman Industries Sold Available-For-Sale Debt Securities That

question 21

Multiple Choice

In April, 2018, Norman Industries sold available-for-sale debt securities that cost $470,000 and received a check from its broker for $793,000. When the check was deposited, the accounting clerk debited cash and credited Available-for-Sale Debt Investments for the full amount. The CFO questioned the entry in December, 2018. If this is an error, what is the proper correcting entry? (Tax rate is 40%.)

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Available-for-Sale Debt Investments } & 323,000 & \\
• \hline \text { Realized Gain } & & 323,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Available-for-Sale Debt Investments } & 793,000 & \\
• \hline \text { Realized Gain } & & 323,000 \\
• \hline \text { Retained Earnings-Prior Period Adj. } & & 470,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Available-for-Sale Debt Investments } & 323,000 & \\
• \hline \text { Income Tax Expense } & & 129,200 \\
• \hline \text { Retained Earnings } & & 193,800 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Realized Gain } & 323,000 & \\
• \hline \text { Available-for-Sale Debt Investments } & & 323,000 \\
• \hline
• \end{array}\]

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Definitions:

Pheromones

Chemical substances produced and released into the environment by an animal, affecting the behavior or physiology of others of its own species.

Chemical Signals

Molecules released by cells that are used to communicate with other cells, affecting their behavior or physiology.

Pheromones

Chemical signals released by an organism to affect the behavior or physiology of other members of the same species.

First Messenger

A signaling molecule that binds to a receptor on the surface of a cell and triggers a biochemical cascade that conveys signals inside the cell.